Firm-Specific Labor and Firm-Specific Capital: Implications for the Euro-Data New Phillips Curve

Julien Matheron

International Journal of Central Banking, 2006, vol. 2, issue 4

Abstract: Standard GMM estimates of the New Phillips curve on euro-area data yield degrees of nominal rigidity that are not in accordance with recent microeconomic evidence. This paper studies whether similar conclusions are reached in a richer model where price setters face firm-specific capital and/or firm-specific labor. We find that combining these elements or considering firm-specific labor alone leads to statistically significant and economically reasonable estimates of the degree of nominal rigidity. In contrast, ignoring firm-specific labor yields estimates that are not supported by microeconomic evidence.

JEL-codes: E1 E3 (search for similar items in EconPapers)
Date: 2006
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Citations: View citations in EconPapers (9)

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